The simplest four words summarizing the method of making money through investment are to buy low and sell high.
So how do we determine what's low and what's high? Today, I will explain in detail.
Many people have an obsession with the low point; they believe that the low point is the lowest point, but that's not the case. The low point is a range. For example, the current web3 market is a low-level range. The current consumer ETF is also a low-level range. The current ChiNext board is not at a historical high, but it certainly isn't low, and gold cannot be considered low either.
Remove the obsession of buying at the low as buying at the lowest point. Once you understand that the low is a range, things become easier to manage.
In investing, vague correctness is better than accurate mistakes.
So what is a low position? There are two facts about low positions: one is a low price, and the other is low sentiment.
Those who do value investing and growth stocks care a lot about the highs and lows of prices. Warren Buffett does not like to buy stocks with a price-to-earnings ratio above 15. Peter Lynch does not like to buy stocks with a PEG over 1.
When we trade stocks in the secondary market to make money, we aim to buy stocks with high performance-to-price ratios. However, you will find that even buying at low levels doesn't guarantee profit, because the performance may have already been realized, or it may not materialize at all. There are many factors that cause stock price fluctuations; you might encounter sudden favorable news that leads to a surge or a black swan event that causes a crash.
So sometimes the market is efficient, and sometimes it is not. Stocks with good performance will sometimes be temporarily forgotten by the market and deemed ineffective, but eventually, they will be remembered and their prices will surge.
We cannot know in advance which stock it will be, so we can only buy a batch of stocks. Among them, a few with outstanding performance will yield returns reflected in stock prices, allowing your investment pool to achieve overall positive returns. This is the fundamental reason why earning 15% annually in the stock market is very challenging.
The law of the way of heaven is that it will not block all paths; good things hide bad things, and bad things hide good things.
The fundamental reason for making money is to buy at low prices, then wait for the value to be realized and sell to achieve buy low and sell high.
There are many paths to making money in the market, but all methods ultimately boil down to trading performance and trading concepts. Even if you buy Nvidia or Tesla, or Circle, even if their stock prices are already good, with some price-to-earnings ratios in the hundreds, and some even at a loss, there are still people continuously buying in, as they are looking forward to future performance explosions. Compared to the future, they think current prices are very low. This logic is sound, as long as future performance completely explodes, then the current high price-to-earnings ratio can immediately be caught up.
Therefore, some people see prices as very high, while others see them as very low. This stems from two different investment systems.
For example, there is speculation in concepts, such as various meme coins in the cryptocurrency world and speculation on Bitcoin. Essentially, these are all about trading sentiment.
Some people can make a lot of money trading coins, while others cannot understand it at all. The root cause is that they do not understand the highs and lows of market sentiment and are constantly swayed by it.
The human judgment system has evolved to prioritize survival above all, not to make money. Therefore, it is all about seeking benefits and avoiding harm. Most people cannot buy when prices drop; they only want to buy when prices rise, driven by their own emotions, and think about making significant profits.
Recently, a well-known figure in the cryptocurrency world lost 700 million dollars like that. He bought Ethereum at over 1000 and sold it at 4000. Due to the large capital, the absolute return was remarkable. He later continued to leverage buy at 3000, probably hoping to get a rebound and sell at 4000 for more profit, but 3000 is definitely not a low buying price; market sentiment was not low at all, so he lost back all his previous gains. He violated his investment system and was ultimately devoured by the market, losing his original profits.
Most people lose money not in bear markets like today, but when they buy in at times of high market sentiment and then lose when it drops to the current level. Or they simply miss selling at the high sentiment and fail to adhere to the principle of buying low and selling high.
In the cryptocurrency world, no matter what coin you buy, to make money, you must learn to recognize the highs and lows of sentiment.
Buying when market sentiment is low is essential. Is it low sentiment now? Certainly, but whether it is the lowest, who knows? However, I definitely won't choose to buy when Bitcoin is at 110,000; at that time, I don't know if market sentiment is at its highest, but it is certainly not low. I would rather miss out than buy in.
There are also concept stocks in the secondary market. For example, the commercial aerospace sector is very hot in the stock market. When you see it, it has already risen for a while, and many stocks have doubled. When the market is buzzing about commercial aerospace, the simplest judgment is that sentiment is no longer low, so you shouldn't buy in.
You don't need to know if it's considered high or not, you just need to know it's not low, and you shouldn't buy in. Keep your capital; there will always be opportunities to make money in the market. You can always wait for the emotions to be low before buying in.
If you have not learned to recognize the highs and lows of market sentiment, then temporarily, you should not buy coins. You are basically giving away money.
Learning to buy low is easy. Compare market capitalization, compare sentiment. The emotions in the market are transparent; the way of heaven operates openly, revealing everything. However, if you lack experience, it won't help you; you may easily be misled and swayed by market sentiment, feeling afraid of missing out or believing you're earning too little, leading you to doubt what the way of heaven tells you.
Moreover, it is even more important to learn to sell when emotions are high. The previously mentioned low position is not a specific point, nor is the high position. It is a range; as long as you sell in this high sentiment range and make a profit, it is considered a successful investment operation. Don't be obsessed with selling at the highest point.
Still, the same saying: as long as your capital is intact, the market will always give you opportunities to make money.